In the November 1, 2004 Issue:

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Gubernatorial Election Results for 11 Races
Going into yesterday's elections, it was clear at least five states would have freshmen governors as three incumbents chose not to run for re-election and two incumbents lost their parties’ nominations to seek new terms. The five states were Missouri, Montana, Utah, Washington and West Virginia.

With the tallying of the votes, the number had grown to seven new governors as incumbents in New Hampshire and Indiana were unseated by successful challenges. Winning re-election were four sitting governors: Ruth Minner in Delaware, Mike Easley in North Carolina, John Hoeven in North Dakota, and Jim Douglas in Vermont.

At press time, no winner had been declared in the extremely close Washington race for governor. Republican Dino Rossi was ahead of Democrat Christine Gregoire by four one-hundredths of a percent at the last count. (see http://vote.wa.gov for more information)

Four of the six new governors in the decided races bring a change in party-affiliation to their governors mansions. Democrats took control in Montana and New Hampshire, while Republicans claimed Indiana and Missouri.

So what have the freshmen governors proposed for their states regarding programs, policies and initiatives to encourage knowledge-based economic growth? Time will tell, but drawing only from the candidates' official campaign websites, SSTI has compiled the following information:

Indiana
Former director of the U.S. Office of Management and Budget Mitch Daniels (R) plans to encourage private investment by providing automatic property tax phase-in on all new investment in job-creating business property. Daniels also wants to increase Indiana’s research and development (R&D) tax credit to 15 percent, to apply the state's sales tax exemption to R&D, and to foster the development of regional venture capital funds. He promised also to create a unit in state government dedicated to securing federal funding in the form of procurement and grants, with particular attention to federal R&D funding.

Daniels has proposed the state establish a Motor Sports Tech Park devoted to R&D, testing facilities, and motor sports manufacturers. He also wants to extend Indiana's venture capital tax credit to qualified motor sports entities and to encourage state universities to partner with technology parks in providing high tech motor sports training and internship programs.

Drawing from the model adopted by neighboring Michigan, Daniels also plans to expand high-speed Internet access across the state through the appointment of a chief technology officer and the creation of a Broadband Finance Authority to guarantee low-interest loans to underserved communities.

Under the "More Ideas" section of his jobs platform, Daniels proposes convening "regular meetings of Indiana’s university presidents to review the schools’ progress in new business formation, patents, and technology transfer revenues, and encourage curriculum enhancements to foster entrepreneurship in tomorrow’s business leaders."

Missouri
Secretary of State Matt Blunt (R) is proposing a new-hire tax incentive to reward small business owners and entrepreneurs that are taking significant steps in hiring new employees, and a job training tax incentive to offset the cost of enhancing the skills of employees in order to develop the workforce. In terms of higher education, Blunt proposes increased funding for state colleges and universities and insulating higher education from spending cuts. He also plans to make improvements to MOST, the state’s college savings plan, by modeling upgrades on practices from the best 529 plans in America.

Using licensing revenues of $20 million from commercialization of Wisconsin universities' technologies as a benchmark, and based on Wisconsin having a similar population level as Missouri, Blunt suggests the state "establish the goal of increasing commercialization of technology developed at Missouri's public colleges and universities, creating a valuable income stream from which the institution and the state as a whole can benefit."

Montana
Brian Schweitzer (D) plans to create an office of venture capital within the governor's office to promote start-up companies. He also plans to continue state support for Tech Ranch, a Montana State University program with a record of incubating start-up companies and commercializing university-based research. In addition, Schweitzer said, "We will help companies develop products in the private sector that evolve from our public research efforts."

He wants to restore the state's contribution levels for funding higher education, particularly at the state technical and community colleges. He wants to encourage more Montana high school students to attend technical or community college, mentioning specific fields of need for Montana businesses, such as: information technologies, electronics, civil engineering technologies, heating and air conditioning, plumbing, auto repair, specialized lathe operation, specialized welding, and the operation of other specialized machinery.

Schweitzer also plans to focus on hydrogen power development and aggressively compete for research capital from both the private and public sectors for training leaders in hydrogen technology. He would like to work with the tribal nations to encourage economic development, using alternative energy as an example of an attractive starting point.

New Hampshire
John Lynch (D), chairman of the University System Board of Trustees, proposes to invest in higher education to increase its affordability and accessibility for all New Hampshire citizens, noting the adverse effects of recent budget cuts. He has promised to veto any legislation that cuts state education K-12 aid.

Lynch also will seek to attract private sector investments in new energy technologies such as wind, biomass and solar power. After developing a State Energy Plan, he plans to identify new industries and new technologies that will generate renewable power sources.

Utah
Jon Huntsman Jr. (R) has outlined an economic revitalization plan that touches on many key elements of tech-based economic development and cluster-based growth. He would like to revise the state's tax code and tax incentive structure to encourage and reward high-wage job creation. Huntsman would revamp the state R&D tax credit to make it refundable, more beneficial for key industries such as biotechnology, and more flexible for small to mid-sized companies.

Huntsman has also promised to "streamline Utah's technology transfer process at our research universities to make it effective for business creation." He supports "substantial" funding for the Centers of Excellence Programs and plans to appoint a joint state/private task force to raise money to endow 30 new chairs in strategic technology and research areas within Utah's colleges and universities.

To encourage entrepreneurship, Huntsman would eliminate corporate tax on all businesses with less than $5 million in revenues for their first five years. He wants to provide support to new and existing angel and venture funds, and to expand the state's new fund of funds legislation to specifically target mezzanine and middle-stage financing.

Washington
State Senator DinoRossi (R) plans to free businesses of unnecessary bureaucracy and allow them to grow and create new jobs through enacting a systems-wide reform to reduce regulations. He also plans to establish a regulatory reform office to eliminate regulations that hurt jobs and business growth and begin a proactive, aggressive effort through the Governor’s Office to recruit and retain businesses.

Attorney General Christine Gregoire (D) wants to transform Washington into the nation’s leader in life sciences through the creation of a $1 billion public/private life sciences discovery fund, financed through the state's tobacco settlement money. Her plans include the creation of a sponsored advanced research credit to attract new jobs and bring industry research to the state. Also on Gregoire’s agenda is regionalizing state economic development efforts, expanding workforce training programs at community and technical colleges, and providing partial tax credits to businesses investing in higher education skill sets.

West Virginia
Secretary of State Joe Manchin (D) plans to implement a clustering approach in West Virginia for key industries, such as polymers, speciality chemicals, biometrics and homeland security. Manchin would work with regional public and private stakeholder around the state to identify the appropriate clusters and the strategic needs to be addressed.

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Update on Key TBED Issues, Referenda from Around the Country
The Oct. 25 issue of the SSTI Weekly Digest previewed ballot issues in six states that would have implications for their respective state efforts to grow a knowledge-based economy. The unofficial results at press time for each are provided below:

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Party Control Changes in Several State Legislative Chambers
Unofficial results posted today on the National Conference of State Legislatures (NCSL) website reveals political control of at least 10 of the country's 99 state legislative chambers (Nebraska has a unicameral legislature resulting in the odd total for the country) changed parties in yesterday's election.

NCSL reports "Based on unofficial results, the Democrats won the Colorado House, Colorado Senate, North Carolina House, Oregon Senate, Vermont House and Washington Senate. In case of the Colorado and Washington chambers, the margin of victory is only one seat, and recounts are expected in several districts."

Republicans took control of the Georgia House, Indiana House, Oklahoma House and Tennessee Senate.

NCSL also says control of chamber in a number of state legislatures still await the outcome of key races. Chambers in the balance include the Oregon House, Maine Senate, Minnesota House, Montana House and Montana Senate. More information is available at http://www.ncsl.org.

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Texas Unveils First Phase of Cluster Initiative
Gov. Rick Perry announced last month a long-term, strategic job creation plan that will focus state efforts on six industry clusters that economists say will be the engine of future job creation and economic growth in the U.S. Although the state already has an advantage in terms of a growing workforce, the key is retaining workers that are skilled and trained in emerging technology fields, the governor said.

A study conducted for the Texas Workforce Commission identified the following clusters for the state:

Resulting from last year’s passage of Senate Bill 275, which called for the development of strategies to strengthen the competitiveness of key industry clusters, the initiative aims to attract and retain high-paying jobs. Legislators agreed that by identifying these clusters, the state would be better positioned to compete both nationally and internationally, according to the Governor's Office.

Under the plan, Gov. Perry will appoint a chair from the industry sector in each cluster to form teams charged with meeting long-term goals and objectives. The first task is for teams to conduct a comprehensive assessment of the individual clusters and recommend allocation of state resources. Teams will then submit final recommendations to the governor for review.

As part of the initiative, industry representatives, members of the academic community, economic development leaders and trade association members will be asked to help develop additional recommendations on economic industry clusters for the 2005 legislative session.

More information on the industry cluster initiative is available from Gov. Perry's website: http://www.governor.state.tx.us/

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VC Declines in Third Quarter with $4.3B Invested
Venture capital (VC) investing dipped in the third quarter of 2004, with $4.3 billion going to 601 companies, according to the latest MoneyTree™ Survey by PricewaterhouseCoopers, Thomson Venture Economics and National Venture Capital Association. The Q3 2004 figure was below the prior quarter of $5.9 billion, but equal to the $4.3 billion posted in Q3 2003.

The Life Sciences sector continued to dominate as it has for the past nine consecutive quarters, among MoneyTree™ Survey highlights. Investments in the sector totaled $1.26 billion, or 29 percent of all venture capital. Biotechnology and Medical Devices, the sector's two components, accounted for $771.4 million and $486.3 million, respectively. Seventy-five biotech and 52 medical device companies were funded during the quarter.

With $942 million going to 160 companies, the Software Industry remained in the top slot as the largest single industry category. Software companies accounted for 22 percent of all venture dollars, keeping consistent with the industry's performance historically. Telecommunications continued its two-year decline, attracting $450 million via 58 deals or 10 percent of all VC.

Detailed information for the third quarter of 2004, as well as some historical data dating back to 1995, is available at www.pwcmoneytree.com. Statistical tables showing VC data by congressional district, major metropolitan area, state, region, nation of funding source and other measures are available for each quarter of 2004 thus far. The tables may be accessed by visiting: http://www.ventureeconomics.com/vec/statshome.htm

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Tech Councils and TBED Association News
Four Greensboro, N.C., economic development organizations – the Greensboro Chamber of Commerce, the Economic Development Partnership, Action Greensboro and the Development Corp. – have agreed to consolidate into the Greensboro Partnership.

The New Century Technology Council has changed its name to the NewVa Corridor Technology Council to reflect the regional branding campaign underway for the Roanoke area.

The Oct. 26 issue of the Daily Record in Baltimore reports the 10-year-old Economic Alliance of Greater Baltimore has reorganized its approach toward economic development to focus on three key cluster areas: life sciences, financial services and defense-related information technology.

A $295,000 grant from the U.S. Economic Development Administration has led to the formation of the Mid-Atlantic Nanotechnology Alliance. Founding members include the Ben Franklin Technology Partners of Southeastern Pennsylvania, the Delaware Technology Park and the New Jersey Commission of Science and Technology.

The Columbus Technology Council, Columbus Business Technology Center, and the Science & Technology Campus of Ohio State University have announced plans to merge into a single organization.

The Emerging Markets Private Equity Association, formed in May 2004 and reportedly already representing more than 1,000 private equity and venture capital firms in Asia, Eastern Europe, Africa and the Mid East, recently named Sarah Alexander as its first executive director.

Charles Spies, the new executive director of the National Association of Seed and Venture Funds, has replaced Dan Loague, who is retiring after serving in the position since 1997.

Education and business leaders in Plano, Texas, have created the High Technology Education Coalition of Collin County (Hi-TECC) to ensure local students receive a higher quality education in the fields of science, technology, engineering and math.

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